Economic Implications of foreign exchange rationing in Ethiopia

This paper examines macro-economic developments in Ethiopia between 2004/05 and 2008/09, focusing on the external accounts and the real exchange rate. Simulations using a Computable General Equilibrium (CGE) model of Ethiopia’s economy show that, compared to a policy of foreign exchange rationing, a policy of real exchange rate depreciation and no rationing improves economic efficiency and welfare of all households except those who receive the rents (excess profits) arising from rationing.

Dorosh, Paul
Robinson, Sherman
Ahmed, Hashim
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International Food Policy Research Institute (IFPRI)
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